Question

Svahn, AB. is a Swedish manufacturer of saling yachts. The company has assembled the information shown below that pertains to two Independent decision-making contexts The company chronically has no idle capacity and the old Model B100 machine is the company's constant Management is considering purchasing Model B300 machine to use in addition to the company's present Model 000 machine. The old Model 5100 machine will continue to be used to capacity as before, with the new Model 300 machine being used to expand production. This w increase the company's production and sales. The increase in volume will be large enough to require increases in foed selling expenses and in general administrative overhead, but not in the fixed manufacturing overhead Case B The old Model B machine is not the company's constant but mincement is considering replacing it with a new Model 3300 machine because of the potencial Savings in direct m ess with the new machine The Model 500 machine would be sold This Change we have no efecto production or other than some songs in direct manas costs due to less wat Required Based on the information provided above indicate in the appropriate column whether each items relevant or relevant to the decision context described in Case A and Case 8 Depreciation in + Sock O ve Mode 100 min Mate 1000 m d ing was

Answer 1

А B 1 Particulars Case A 2 Sales Revenue Relevant 3 Direct Material Relevant 4. Direct Labour Relevant 5 Variable Manufacturing Overhead |Relevant 6 Depreciation - Model B100 machine Not relevant 7 Book Value - Model B100 machine Not relevant 8 Diposal Value - B100 machine Not relevant 9 Market Value - B300 machine(cost) Relevant 10 Fixed manufacturing overhead Not relevant 11 Variable Selling Expense Relevant 12 Fixed Selling Expense Relevant 13 General Admin Overhead Relevant 10. C Case B Not relevant Relevant Not relevant Not relevant Not relevant Not relevant Relevant Relevant Not relevant Not relevant Not relevant Not relevant